The New Generation of ETRM Systems

WHITE PAPERTHE NEW GENERATION OF ETRM SYSTEMS Sponsored by INTRODUCTION Energy Trading and Risk Management (ETRM) solutions have now been a part of the broader wholesale energy trading application landscape for around 20-years, having evolved in step with both business and technology trends over that time period. As a result of this evolutionary pro- cess, there are a large number of diverse solutions on the market that address any number of combinations of industrial segments, energy commodities, geographic locations, and functional reach. But, ultimately what is it that separates one ETRM solution from another? The obvious answer to this question is functionality first In recent years, the emergence of web-enabled, or and foremost - customers need a certain functional foot- cloud-based, ETRM solutions serves to emphasize that print that addresses the needs of their business. Howev- point as the ability to more economically license and er, how a solution is architected, designed, and deployed reduce implementation timeframes of these critical sys- is also a key criterion that should not be under estimat- tems is gaining greater importance. This whitepaper ed when assessing solutions and recent research bears briefly examines system architecture and design as a that out (Figure 1). differentiator when selecting ETRM software and also reviews Contigo’s approach in this context. Figure 1: Reasons for dissatisfaction with CTRM Solutions ϱй ϱй ϱй &ƵŶĐƚŝŽŶĂůŝƚLJ ϱй ^ƵƉƉŽƌƚ ϯϴй EŽƚƵƉƚŽĚĂƚĞ ϱй ƌĐŚŝƚĞĐƚƵƌĞ ŝĚŶΖƚĚĞůŝǀĞƌĂƐƉƌŽŵŝƐĞĚ ϵй WĞƌĨŽƌŵĂŶĐĞŝƐƐƵĞƐ EŽĐůŽƵĚ džƉĞŶƐŝǀĞ Ϯϴй  Source – 2016 Vendor Perceptions, Commodity Technology Advisory Report © Commodity Technology Advisory LLC, 2018, All Rights Reserved.  The new generation of ETRM systems A ComTechAdvisory Whitepaper FUNCTIONALITY VERSUS SYSTEM FEATURES? Research1 by Commodity Technology Advisory into buying criteria also demonstrates the above assertions, ranking functionality issues as more important than system features. However, sys- tem features such as a modern architecture and ease of personalization still rank highly (Figure 2). In an era of increasing market complexity and speed, and increased oversight and scrutiny by both regulators and stakeholders, it is our view that certain system features being more sought after and will increasingly be viewed as significant competitive differentiators. These include features such as; At the same time, ease of implementation and availabili- / A  vailability of comprehensive and easily retrievable ty of quality support are also high value features both in audit trails, giving ability to see who did what, when, terms of keeping down costs and staying current with and for what reasons, market trends and functional needs. These features will  /W  orkflow management capabilities to enable stream- be key in rapidly integrating the solution effectively into lined processes, with checks and balances, and is ful- the general application architecture of the user compa- ly auditable to provide accountability and controls, ny.  /T  he ability to visualize information in highly usable form, in near real-time and to be able to drill down Figure 2: Buying Criteria into that information to rapidly identify exceptions, WŚLJƐŝĐĂůŽŵŵŽĚŝƚLJ^ƵƉƉŽƌƚ &ŝŶĂŶĐŝĂůŽŵŵŽĚŝƚLJ^ƵƉƉŽƌƚ find opportunities, help formulate trade ideas, and DĂƌŬĞƚWƌŝĐĞͬZŝƐŬ^ƵƉƉŽƌƚ identify trends, YƵĂůŝƚLJsĞŶĚŽƌ^ƵƉƉŽƌƚ WŚLJƐŝĐĂů>ŽŐŝƐƚŝĐƐ /A  bility to manage and consume large amounts of DƵůƚŝͲƵƌƌĞŶĐLJ DƵůƚŝͲŽŵŵŽĚŝƚLJ data quickly and efficiently, ǀĂŝůĂďůĞĂƚŽŵƉĞƚŝƚŝǀĞWƌŝĐĞ ƌŝƚŝĐĂů /ŵƉŽƌƚĂŶƚ Quality Implementation Resources… / T  he ability to personalize and save screens so that us- ƌĞĚŝƚZŝƐŬ^ƵƉƉŽƌƚ EŝĐĞƚŽ,ĂǀĞ hŶŝŵƉŽƌƚĂŶƚ ers can have immediate access to just those screens ZĞŐƵůĂƚŽƌLJŽŵƉůŝĂŶĐĞ^ƵƉƉŽƌƚ DŽĚĞƌŶĂƌĐŚŝƚĞĐƚƵƌĞ and sets they require. ďŝůŝƚLJƚŽƉĞƌƐŽŶĂůŝƐĞh/ ŽŵƉƌĞŚĞŶƐŝǀĞĂŶůLJƐƚŝĐƐ ^ƵƉƉůŝĞĚLJdŽƉsĞŶĚŽƌ ǀĂŝůĂďůĞŝŶƚŚĞůŽƵĚ Ϭй ϭϬй ϮϬй ϯϬй ϰϬй ϱϬй ϲϬй ϳϬй ϴϬй ϵϬй ϭϬϬй  Vendor Perception Study, 2016, Commodity Technology Advisory 1 2016 Vendor Perceptions Report, Commodity Technology Advisory © Commodity Technology Advisory LLC, 2018, All Rights Reserved. The new generation of ETRM systems A ComTechAdvisory Whitepaper EVOLUTION OF ETRM SOLUTIONS As the industry has evolved in terms of functional needs and preferred technologies, so too have the ETRM systems provided by vendors. Early solutions tended to be client/server applications, installed and maintained on customer servers; however, with the widespread adoption of web technologies, modern solutions are increasingly web-enabled using a services architecture, and available as a cloud-hosted application2. Nonetheless, the pool of vendor provided systems still contains everything in between those points, as many older platforms continue to be updated and modernized by the vendors. When it comes to ease of implementation, integration and sup- port, it is an imperative that the application architecture is clear, modern, and well-designed as opposed to a jumbled mixture of bits and pieces bolted in through time…and even running on multiple technology platforms. Furthermore, after two decades of experience at- In general, more recently developed solutions are tempting to solve the problem, building upon a coher- built on more flexible, adaptable and extensible archi- ent and extensible architecture is a basic requirement. tectures and technologies, yet they will likely have a This involves not just making technology decisions, more limited range of functionality. Older solutions but also design decisions to maximize performance, may have a broader set of usable functionality due to configurability, integration, and support. Ensuring that the breadth of deployment over their life, yet they may data is captured and maintained in the system in such also be utilizing older architectures, tools and technol- a way that it is accessible via near real-time reporting ogies. This is a dilemma that all users procuring new both on screen and in paper format is an example of solutions face and while our research shows that func- how design considerations can have an impact on sys- tionality is often deemed as most important, selecting tem usability. a well-designed and architected solution that provides for structured extensibility can minimize risks and costs over time. 2 2016-2021 CTRM Market Update, Commodity Technology Advisory Report, 2017 © Commodity Technology Advisory LLC, 2018, All Rights Reserved.  The new generation of ETRM systems A ComTechAdvisory Whitepaper ARCHITECTED FOR USE Unfortunately, a rapidly changing industry means rapidly changing requirements and in recent years, increasing regulation and oversight has meant that compliance, controls, and reporting are increasingly important for users (Figure 3). In recent months, traders have been fined large amounts by the CFTC, amongst other regulators, for trade manipulation issuing total fines of more than $1.2 billion in 2016 alone3. Over time, ETRM solutions have evolved from monolithic solutions to a tightly coupled collection of modular components that better facilitates rapid de- velopment and deployment of new functionality. There has also been significant attention paid to configurability and personalization such that the same ETRM solution can be deployed in different contexts (e.g. across industry sectors like utilities, retailers, generators and so on) and provide rich functionality targeted at specific users out of the box. Figure 3 – ETRM Capability Requirements in current business With the advent of the Internet and cloud, more mod- environment ern solutions have web-enabled and highly usable ZŝƐŬZĞƉŽƌƚŝŶŐ user interfaces, and include discrete services to de- >ŽŐŝƐƚŝĐƐͬ^ĐŚĞĚƵůŝŶŐKƉƚŝŵŝnjĂƚŝŽŶ liver functionality including integration, reporting and dƌĂĚŝŶŐKƉƚŝŵŝnjĂƚŝŽŶ even performance improvements. A key consider- ĂƚĂŐŐƌĞŐĂƚŝŽŶͬĂƚĂDĂŶĂŐĞŵĞŶƚ ation, often not considered by many, is the ability to ZŝƐŬŶĂůLJƚŝĐƐ;sĂZ͕DϮDĞƚĐ͘Ϳ upgrade without a near re-implementation of the sys- ZĞŐƵůĂƚŽƌLJZĞƉŽƌƚŝŶŐ tem. Unfortunately, many users of older ETRM solu- ƐƐĞƚKƉƚŝŵŝnjĂƚŝŽŶ tions now find themselves stuck on older versions of /ŶƚƌĂͲĂLJdƌĂĚŝŶŐĂƉĂďŝůŝƚŝĞƐ the solution unable to justify the cost and risk of an ƌĞĚŝƚZŝƐŬDĂŶĂŐĞŵĞŶƚ upgrade. Many invariably end up having to self-sup- KǀĞƌĂůůĨĨŝĐŝĞŶĐLJͲŽŶƐŝƐƚĞŶƚh/͕^dW͕ĞƚĐ͘Ϳ port it at significant and ever-increasing cost. Adding dƌĞĂƐƵƌLJĂƉĂďŝůŝƚŝĞƐ;ĐĂƐŚĨůŽǁŵĂŶĂŐĞŵĞŶƚ͕ bespoke functionality to address business change re- ďĂůĂŶĐĞƐŚĞĞƚĞdžƉŽƐƵƌĞĞƚĐ͘Ϳ ƐƐĞƚDĂŶĂŐĞŵĞŶƚ sults in increased complexity and unsustainable costs More ϭ͘ϬϬ Improtant ϭ͘ϮϬ Less Important ϭ͘ϰϬ ϭ͘ϲϬ ϭ͘ϴϬ Ϯ͘ϬϬ Ϯ͘ϮϬ which can ultimately force an organisation to abandon ƵƌŽƉĞ EŽƌƚŚŵĞƌŝĐĂ dŽƚĂů the solution altogether.  Source – ETRM in a low price environment, Commodity Technology Advisory Report, 2017 3 https://www.reedsmith.com/en/perspectives/2017/01/us-cftc-enforcement-key-compliance-takeaways-from © Commodity Technology Advisory LLC, 2018, All Rights Reserved. The new generation of ETRM systems A ComTechAdvisory Whitepaper CONTIGO’S APPROACH Contigo is a fairly recent addition to the ETRM and related software market offering a variety of applications to the European energy industry. Increasingly known for ease of implementation, and having been in existence long enough (since 2006) to have garnered a strong and vibrant customer base and solid brand awareness, its solutions are available hosted in the cloud or tra- ditionally installed. This means that Contigo has more modern software developed on a coherent web-enabled architecture but that it has added sufficient functionality to be broadly applicable to European energy markets and to perhaps lead in some of those markets. Commodity Technology has been in the position of fol-  /C  onsistent and flexible user interface, lowing Contigo as an analyst firm for many years watch-  /P  rocessing should be real-time and not rely on end ing the company grow and broaden its geographic and of day process. functional reach across the market place. The compa- ny’s founders, having worked in the industry for years One of the differentiators from day one was their deci- prior to launching the business, had years of experience sion that all trades, positions, and curves hold volume, developing and implementing third-party and internally price and so on, were captured and maintained in the developed software. Applying “lessons learned”, this system as time series data – and the system is contin- team adopted a particular set of architectural principles uously optimized to ensure such data can be imported from day one: rapidly. The time series data is held at the granularity  /S  imple architecture based on an application server, a of the specific commodity based on calendars such as windows service and database, 15-minute, half-hourly allowing summations of data to  /A  ll user access via a web browser, any level but, more importantly, it becomes much easier  /D  esigned to handle large volumes of time series data to aggregate, slice and dice data, which is exactly what quickly, users require. This is an example of how design can im-  /A  ll data accessible via SQL, pact usability and performance providing differentiation  /M  ajority of functionality accessible via web services in the process. API,  /S  ame architecture for deployed and hosted custom- Integration is also a key concern as ETRM solutions ers, must aggregate data from, and send data to, a large  /D  esigned for extensibility to all “plug ins”, number of other systems within the enterprise. Conti- go’s integration framework is a good example of how  /D  esigned for integration using managed ‘worker’ ser- vendors tackle this problem with more modern ap- vices, © Commodity Technology Advisory LLC, 2018, All Rights Reserved.  The new generation of ETRM systems A ComTechAdvisory Whitepaper plications. Typically, Contigo’s enTrader is deployed By providing this integration framework, Contigo is able within a broader application and data landscape. This to swiftly implement and set up its solution for users. landscape can include a variety of external systems like nominations & scheduling, finance and accounting, op- Contigo has developed an overall set of architecture timization applications and communications. To ensure principles and adopted specific designs such as a time customers can effectively integrate enTrader into their series data approach and modular architecture. This business and technical infrastructures, Contigo take a ability to configure and ‘plug in’ custom functionality en- multi-faceted approach: ables its solution to be implemented rapidly with mini-  / p roviding secure access to all functionality available mum disruption. These same features allow it to provide through the user interface via a web services API, cost effective support and maintenance as well keeping  /S  eamless, out-of-the-box integration to Trayport Joule costs and risks down for its users. The founders of Conti- Direct, APX, N2EX and EPEX ETS go thought carefully about implementation and support using the Connect module. The Connect module cap- when setting out to design their solutions coupled with tures the raw data from the venue and then applies map- their experiences with other commercial and indeed, be- ping rules and enrichment to convert the raw trade into spoke solutions. Their choice of technologies enables an enriched enTrader Trade. The enrichment process delivery in the cloud which, even if the customer settles will determine the correct counterparties and agree- on a traditional install, still helps the customer by pro- ment, determine the correct product, delivery dates and viding snapshots of upgrades and work in progress via notional value and volume and will determine the correct the cloud and has helped it gain a reputation for ease of trader and book. The Connect module is maintained by implementation in the marketplace. Contigo so it is always up to date. / a llowing other providers to “plug in” additional func- tionality allowing seamless extension to the base functionality,  / a number of other features including standard Excel import/export and document generation templates. © Commodity Technology Advisory LLC, 2018, All Rights Reserved. The new generation of ETRM systems A ComTechAdvisory Whitepaper ARCHITECTURE, TOOLS AND APPROACH MATTER One key driver of any selection exercise will always be functional fit. Unless the solution meets the functional needs of the buyer, it’s a non-starter. However, in procuring solutions, buyers also need to consider other factors such as ease of implementation, cost of support, ease of making upgrades to stay current with industry needs and software developer’s versions, as well as indus- try regulations and the increased emphasis on controls. The best way to assess this is to look at the architecture of the solution, including the underlying architectural and design principles used by the vendor. The Contigo approach is an example of how architec- or sub-optimal use. In today’s more cost sensitive tural and design principles can influence all aspects markets, these are all key differentiators and buying of a solution’s ability to deliver value without high points for those selecting ETRM software. costs and without undue risks such as non-delivery Note: enTrader is a registered trademark of Trayport Limited. © Commodity Technology Advisory LLC, 2018, All Rights Reserved. ABOUT CONTIGO We are a European focused Energy Trading and Risk Management solutions provider based in the heart of the U.K. Contigo is an award winning supplier of Energy Trading and Risk management solutions that simplify energy trading and are used by businesses in the UK and across Europe. Based in Solihull, in the UK, it uses the latest technology and a smart approach to deliver modern, flexible and easy to use software solutions for all points in the energy value chain, in- cluding generation, wholesale and retail trading. Contigo supplies and implements its award-winning enTrader® software, which simplifies energy trading. Pre- configured for the European energy market with ready to use functionality, enTrader® uses the latest technology, is deliv- ered in the Cloud or on premise, and can be implemented quickly and with low risk to support all traded European ener- gy market derivatives. Contigo is a business unit of Trayport, the provider of www.contigosoftware.com Trayport Joule and Trading Gateway. All trades executed on the Trayport platform can be automatically imported into [email protected] enTrader® for further processing and validation with minimal configuration. The name Contigo means ‘with you’ and the company is pas- sionate about working in partnership with clients to ensure Contigo operates a transparent approach to charging, with no they have the very best solutions that bring real business hidden costs, and the majority of software upgrades are pro- benefits and value. The team includes a highly experienced vided for no additional charge, within a customer’s monthly implementation team and dedicated on-going support team. fee. ABOUT TRAYPORT LIMITED Trayport is a leading provider of energy trading solutions to panies in high profile markets. Founded in 1993, Trayport has traders, brokers and exchanges worldwide. It develops, de- offices in London, New York and Singapore. Trayport Hold- ploys and supports quality, resilient software for trading in ings Limited is a wholly-owned subsidiary of TMX Group Lim- multiple asset classes worldwide in cleared or OTC markets. ited (TMX Group). For more information about TMX Group Trayport’s software is used by the world’s largest trading com- and terms of use, please visit: www.tmx.com ABOUT Commodity Technology Advisory LLC Commodity Technology Advisory is the leading analyst organization covering the ETRM and CTRM markets. We provide the invaluable insights into the issues and trends affecting the users and providers of the technologies that are crucial for success in the constantly evolving global commodities markets. Patrick Reames and Gary Vasey head our team, whose combined 60-plus years in the energy and commodities markets, provides depth of understanding of the market and its issues that is unmatched and unrivaled by any analyst group. For more information, please visit: www.comtechadvisory.com ComTech Advisory also hosts the CTRMCenter, your online portal with news and views about commodity markets and technology as well as a comprehensive online directory of software and services providers. Please visit the CTRMCenter at: www.ctrmcenter.com 19901 Southwest Freeway Sugar Land TX 77479 +1 281 207 5412 Prague, Czech Republic +420 775 718 112 ComTechAdvisory.com Email: [email protected]